Abstract

http://ssrn.com/abstract=1633626
 
 

References (29)



 
 

Citations (1)



 


 



The Informativeness of FIN 48 ‘Look-Forward’ Disclosures


Amy E. Dunbar


University of Connecticut - Department of Accounting

Thomas C. Omer


University of Nebraska at Lincoln - School of Accountancy

Thomas D. Schultz


Western Michigan University

May 1, 2010


Abstract:     
FASB Interpretation No. 48 (FIN 48) requires firms to disclose a forecast of significant changes in unrecognized tax benefits (UTBs) that are reasonably possible to occur within 12 months of the reporting date. According to paragraph 21(d), the “look-forward” disclosure, a firm must disclose either an estimate of the range of the change or state that an estimate cannot be made. Prior to the adoption of FIN 48, the willingness of firms to provide a meaningful estimate was debated because of the potential use of the information by tax authorities. We compare firms’ predictions of expected UTB changes to their subsequently reported changes and find that firms with relatively low cash effective tax rates or involved in a tax dispute are more likely to provide a disclosure that states that a change is possible, but no forecast of the change is provided. This evidence is consistent with firms being reluctant to disclose expected reserve releases related to audit settlements or impending statute lapses. On the other hand, for those firms that do provide a forecast, our forecast accuracy analysis reveals significant understatement and overstatement errors, which suggests task difficulty rather than strategic understatement of the anticipated changes in tax reserves.

Number of Pages in PDF File: 45

Keywords: unrecognized tax benefits, tax contingency reserve, FIN 48, look-forward disclosure

JEL Classification: M41, M48

working papers series


Download This Paper

Date posted: July 3, 2010  

Suggested Citation

Dunbar, Amy E. and Omer, Thomas C. and Schultz, Thomas D., The Informativeness of FIN 48 ‘Look-Forward’ Disclosures (May 1, 2010). Available at SSRN: http://ssrn.com/abstract=1633626 or http://dx.doi.org/10.2139/ssrn.1633626

Contact Information

Amy E. Dunbar (Contact Author)
University of Connecticut - Department of Accounting ( email )
School of Business
Storrs, CT 06269-2041
United States
860-486-5138 (Phone)
860-486-4838 (Fax)
Thomas C. Omer
University of Nebraska at Lincoln - School of Accountancy ( email )
307 College of Business Administration
Lincoln, NE 68588-0488
United States
Thomas D. Schultz
Western Michigan University ( email )
Kalamazoo, MI 49008
United States
269-387-6064 (Phone)
Feedback to SSRN


Paper statistics
Abstract Views: 504
Downloads: 125
Download Rank: 128,275
References:  29
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.594 seconds